Title
South Pacific Sugar Corp. vs. Court of Appeals
Case
G.R. No. 180462
Decision Date
Feb 9, 2011
Philippine sugar importers failed to fulfill contractual obligations, forfeiting 25% conversion fee under Bidding Rules; Supreme Court upheld SRA's decision, denying reimbursement.
conversion fee
importation
sugar

Case Summary (G.R. No. 180462)

Factual Background

In 1999, the government projected a shortage of approximately 500,000 metric tons of sugar due to the effects of El Niño and La Niña. To fill the expected deficit and stabilize prices, then President Estrada issued EO 87, which facilitated sugar importation by the private sector.

EO 87 created a Committee on Sugar Conversion/Auction and authorized it, under Section 2, to determine parameters and procedures for importation and the collection and remittance of the conversion fee. Section 3 of EO 87 provided that conversion would be by auction and would be subject to a conversion fee to be remitted by the SRA to the Bureau of Treasury. Pursuant to EO 87, the Committee issued on 3 May 1999 the Bidding Rules that governed sugar importation, including the collection of the conversion fee and forfeiture consequences.

Under the Bidding Rules, an importer had to pay 25% of the conversion fee within three working days from receipt of the notice of bid award and pay the remaining 75% upon arrival of the imported sugar. The Bidding Rules further provided a forfeiture mechanism. Specifically, paragraph G.1 stated that in case of failure of the importer to make the importation or for the imported sugar to arrive in the Philippines on or before the set arrival date, the 25% of the conversion fee bid already paid would be forfeited in favor of the SRA, and the imported sugar would not be classified as “B” (domestic sugar) unless, upon application with the SRA and without objection of the Committee, the SRA allowed conversion after payment of 100% of the applicable conversion fee.

The SRA authorized the importation of 300,000 metric tons of sugar in three tranches with specified arrival windows. Through the Committee’s publication of the invitation to bid, multiple importers submitted tenders, and the petitioners emerged as winning bidders for the tranches assigned to them. For the third tranche, Sugar Mill submitted a winning bid of P286.80 per 50 kilogram for 10,000 metric tons, while Pacific Sugar submitted a winning bid of P285.99 per 50 kilogram for 20,000 metric tons, for a combined total volume of 30,000 metric tons.

Pursuant to the Bidding Rules, Sugar Mill paid 25% of the conversion fee amounting to P14,340,000.00, while Pacific Sugar paid 25% of the conversion fee amounting to P28,599,000.00. The petitioners later delivered only 10% of their sugar allocation, or a total of 3,000 metric tons. They requested the SRA to cancel the remaining 27,000 metric tons of sugar importation, blaming a sharp decline in sugar prices. They also sought reimbursement of the corresponding 25% of the conversion fee in the total amount of P38,637,000.00.

The SRA denied their request and informed the petitioners that the conversion fee would be forfeited pursuant to paragraph G.1 of the Bidding Rules. The SRA also advised that the authority to reconsider their request for reimbursement lay with the Committee on Sugar Conversion/Auction.

Trial Court Proceedings

On 26 February 2002, the petitioners filed a complaint for breach of contract and damages in the Regional Trial Court (Branch 77) of Quezon City, docketed as Civil Case No. Q-02-46236. In the notice of appearance, the Office of the Solicitor General (OSG) deputized Atty. Raul Labay of the SRA’s legal department to assist the OSG. The notice specified that the OSG would retain supervision and control over representation, and that approval would be required for withdrawals, non-appeal, or other actions that might compromise the interests of the government. It also stated that only notices of orders, resolutions, and decisions served on the OSG would bind the government.

On 19 December 2006, the RTC ruled in favor of the petitioners. It held that paragraph G.1 of the Bidding Rules contemplated delay in the arrival of imported sugar rather than cancellation of sugar importation. It therefore concluded that the forfeiture provision did not apply because the petitioners cancelled the importation rather than delayed delivery. The RTC ordered the SRA to pay P38,637,000.00 as reimbursement of the 25% conversion fee. It denied legal interests, compensatory damages, exemplary damages, and attorney’s fees.

After receiving copies of the RTC decision, the OSG received its copy on 5 January 2007. On 24 January 2007, the deputized SRA counsel, Atty. Raul Labay, received his own copy and filed a notice of appeal on 7 February 2007.

The petitioners then moved to expunge the notice of appeal, arguing that only the OSG as principal counsel could decide whether to appeal and that the deputized lawyer lacked authority to decide to file a notice of appeal. The OSG opposed the motion, asserting that under its notice of appearance it had authorized Atty. Labay to assist and that its approval requirement related to actions compromising government interests, not to the act of appealing itself. On 26 June 2007, the RTC granted the motion to expunge the notice of appeal. The OSG moved for reconsideration; on 6 August 2007, the RTC denied it. On 31 August 2007, the RTC granted the petitioners’ motion for execution.

The RTC thereafter issued a writ of execution on 6 September 2007 and an amended writ of execution on 12 September 2007. Aggrieved, the SRA filed in the Court of Appeals a petition for certiorari under Rule 65, seeking annulment of the RTC orders and the writs of execution.

Proceedings Before the Court of Appeals

The Court of Appeals held that the deputized SRA counsel had authority to file a notice of appeal. It directed the RTC to give due course to the appeal filed by Atty. Labay. In its 6 November 2007 Decision, the Court of Appeals granted the petition, annulled and set aside the RTC orders dated 26 June 2007, 6 August 2007, and 31 August 2007, and also annulled and set aside the writs of execution dated 6 September 2007 and 12 September 2007. It ordered the RTC to give due course to the Notice of Appeal dated February 7, 2007 filed by Atty. Raul M. Labay on behalf of the SRA.

The Parties’ Contentions in the Supreme Court

In the Supreme Court, the petitioners maintained that Atty. Labay was not authorized to file the notice of appeal; that the OSG alone had the sole authority to decide whether to appeal; and that certiorari could not be used as a substitute for a lost remedy of appeal. They also argued that the conversion fee amounting to P38,637,000.00 remained private funds because it was subject to summary forfeiture and thus should not be regarded as public funds.

The OSG, in response, asserted that even assuming Atty. Labay lacked authority to file the notice of appeal, the defect was cured when the OSG later filed an opposition to the motion to expunge. The OSG reasoned that if the denial of the appeal were upheld, the SRA would lose its remedy to challenge the RTC ruling ordering reimbursement despite the petitioners’ failure to comply with their undertaking to import sugar.

Supreme Court Ruling on Appeal-Notice Authority

The Supreme Court rejected the petitioners’ challenge to the authority of the deputized SRA counsel. It relied on Section 35, Chapter 12, Title III, Book IV of the Administrative Code of 1987 (otherwise known as Executive Order No. 292). Section 35 empowered the OSG to represent the Government and its agencies in any litigation and, when authorized, to represent government-owned or controlled corporations. The same section also empowered the OSG to deputize legal officers to assist the OSG and appear or represent the Government in cases involving their respective offices, with the OSG exercising supervision and control over the legal officers for such cases.

The Court invoked National Power Corporation v. Vine Development Corporation, where it held that the OSG’s deputization of counsel in cases involving NAPOCOR included authority to file a notice of appeal. It explained that even if deputized counsel lacked authority, the defect would be cured by the OSG’s subsequent manifestation. It distinguished National Power Corporation v. NLRC, where only the deputized counsel had been served with the decision and the period to appeal had not commenced as to the OSG because service on deputized counsel alone was insufficient and non-binding.

In the present case, the Court noted that records showed that both the OSG and the deputized SRA counsel received copies of the RTC decision. Therefore, the Court held that Atty. Labay was authorized to file a notice of appeal. Alternatively, it held that even if there were any defect in authorization, the OSG cured it when it subsequently filed an opposition to the petitioners’ motion to expunge the notice of appeal. The Court construed the OSG’s reservation in the notice of appearance—requiring approval for withdrawal, non-appeal, or other actions compromising government interests—as intended to protect the government against prejudicial acts, not to prevent an appeal from being filed.

The Court held that the RTC should have given due course to the notice of appeal filed on time. It therefore concluded that the RTC’s 19 December 2006 Decision could not be treated as final.

Disposition on Reimbursement and Forfeiture

While the Court recognized that the next procedural step would have been to remand the case to the RTC, it declined remand to avoid delay and to frustrate the ends of justice. It invoked recognized circumstances where remand could be avoided: where the ends of justice would not be served, where public interest demands early disposition, or where the trial court had received all evidence and the Supreme Court could decide on the merits.

The Court held that the petitioners were not entitled to reimbursement of P38,637,000.00. It focused on the legal effect of paragraph G.1 of the Bidding Rules and on the petitioners’ failure to import the remaining 27,000 metric tons specified in their sugar import allocation.

The Court emphasized that the Committee on Sugar Conversion/Auction had authority under Section 2 of EO

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